Chainanalysis has attempted to measure the adoption of decentralized finance worldwide and issued the Global DeFi Adoption Index, where compiled statistics show an 880% increase in the usage of DeFi. However, crypto is not so close to becoming mainstream as some developed markets become reluctant on the crypto market.
Instead of using the usual metrics based on the volume of transactions and the number of assets being exchanged, the Global DeFi Adoption Index uses new methods taking into account non-professional and small-scale crypto traders. They also consider ordinary activities like making payments and savings, not just trading, exchanges, and making speculations. By doing this, they not only focus on big economies and crypto markets.
The metrics used in measuring DeFi adoption are pretty diverse and involving. These include; On-chain cryptocurrency value received, On-chain retail value transferred, and Peer-to-peer (P2P) exchange trade volume. On-chain cryptocurrency value received consists of measuring the amount of cryptocurrency activity concerning the wealth of individual residents of the country. The on-chain retail value transferred is done by comparing cryptocurrency activity done by retail transactions (which are assumed to be worth below $10000) to the wealth of individual residents of the country.
P2P exchange trade volume involves the measure of cryptocurrency exchanged from individual to individual. This process takes into account the number of internet users. The wealth of individuals in a country is determined by Purchasing Power Parity (PPP) per capita.
Using these metrics, it shows a spike in DeFi adoption in emerging markets compared to developed ones. According to Chainalysis, out of 154 countries, Vietnam, India, Kenya, Ukraine, and Pakistan took the top 5 positions in terms of DeFi adoption.
The main explanation of this is that they limit traders on how much money they can transfer in and out of the country. Cryptocurrency gives them a limitless chance to move finances for their needs that encourages many traders to join in.
Although, DeFi is still away from becoming mainstream. According to DeFi Llama, there is an increase in the total value locked in DeFi from $5b to $182.21b today. However, this does not take into consideration the individual crypto traders who are mainly small-scale.
Despite this, we are not so close to making crypto mainstream financial markets as some developed markets become reluctant on the crypto market. With issues like the China crypto crackdown, it will take a while to become mainstream.
As reported before, Central, Northern, and Western Europe (CNWE) have become the world’s biggest crypto economy. Over the last year, the region has received over $1 trillion worth of cryptocurrency, reaching 25% of all global activity. The tremendous growth that started in July 2020 pushed Europe from second to first place since last year. Amid retail activity increased, institutional investments drove most of the transactions, with 50% going to DeFi.